Does anyone here own rental property?

[gizmonic]

I'm not sure if this is the place to post but here goes:

The house next door to us is up for sale by owner. We had a look around over the weekend and are now mulling over the idea of buying the place for rental property.

It is about the same age as ours (built in 1971) but smaller.

Some of the pros:
proxmity, convenience, opportunity (next door to us). Not everyday that your neighbor's house goes up for sale.
price (asking 122,500)
land (big back yard/about an acre)
4 bedrooms

Cons:
electric and phone need to be updated/rewired
1 bathroom
price (122,500 as is) Naturally, we will negotiate.
bit of water damage in bathroom due to no fan/ventilation
gravel driveway
Rodent problem (i've seen squirrels enter under the roof)

Any DUer's out there w/rental property experience? What can we expect w/this venture? :shrug:

TIA

[NMDemDist2]

1. living next door will help a lot

my neighbor in PHX married my other neighbor and they rented out his house and lived in hers

he had very few problems with tenants since he lived right across the street

If you can swing it, the repairs you are talking would be well worth the investment I would think.

maybe talk to a Tax Professional though and see what the tax ramifications would be there before making a final decision

[sbj405]

2. I do.

It was my residence for five years. I'm currently looking for tenants. Some things to keep in mind - any fees/special permits required by your city/county for rental properties, lead paint issues, code issues. A number of things that are legit for owner occupied are not ok for rental properties (ex. a deadbolt with a key on the inside). Obviously, with any property, an inspection is a must.

In terms of finances, you need determine how long you could carry the property without tenants (both while repairs are made and no longer if necessary). Factor in costs to market the place (real estate listing fee, newspaper ads, time to show the place, etc.).

Again, I'm most familiar with the prep and "finding tenants" phase, so ask away on that front.

Real estate is a great investment in the long run, so if you can make it work, i'd say go for it. Just realize it may not be a money maker in the short term.

[Digit]

3. You have already been given some good advice

You might want to check out craigslist.org to get an idea what rents are like in your area.

If you DO, buy this property, use the same site to advertise for tenants. You can include pictures and even link to a map of where your property is located...all for free.

Have your tenants do a walkthru and note any problems. Get them to sign and date the document. This will cover you in case they cause damage and say it was there beforehand. It sure saved my butt once.

Also, if you only check with their current landlord, you may just end up speaking with someone who wants to get rid of them...I check also with the landlord BEFORE the current one.

It really will help being next door. The really bad tenants will not want you so closeby.

I have had great tenants, and tenants from hell. I don't allow certain breeds of pets (pit bulls and the like). I understand how people feel about these things, but my insurance carrier would drop me if I accepted one.

Damn, one more thing. Check with your governmental body that deals with landlord tenant and find out what interest you have to pay on deposits. I know of one state that requires payment of 5%!!
That adds up!

Best of luck!

[mahina]

4. If you live anywhere that military people live, they are great tenants

A friend told me she only rents to military people, and she gets their commanding officer's name on the application first. They will, absolutely always, pay the rent. Some are rowdy and some aren't but it's easier to put up with a lot when the rent gets paid. Not all of course are people you would rent to, like with any population there are credit problems, which you would of course screen for.
Here's my favorite new site for finding good tenants:
https://www.ahrn.com/

I used that site for my last vacancy and I had lots of qualified applicants instantly. They get good housing allowances too.

The other thing I can say is, you will want to meet both people in a couple. I got a psycho tenant by just leasing to the boyfriend. The girlfriend has a restraining order out on him now. I paid them a lot of money to leave. He bounced the 1st and last months rent and made life hell for a week. Someone else's problem now!

[Warpy]

5. Bring in an inspector

and use his report to negotiate the price. Get estimates on upgrading the electrical (you might not need rewiring, just replacement of the fuse box with breakers etc.) and installing ventilation in the bathroom, something that most codes will insist you do. An inspection will also turn up other problems that you might not realize need to be fixed, like borderline heating and hot water equipment, hidden structural flaws, etc.

The squirrels are a bad sign, by the way. They tend to gnaw on wiring and foul up insulation.

Most landlords will tell you the headaches depend entirely on who you end up with as tenants. Most renters are nice people, but they know the house is not really theirs and will not take upkeep as seriously as owners will. There will be more wear and tear from renters, in other words.